Market Review – January/February 2019 (Part 1)

2019 has started with significantly more resistance than 2018, as markets continue to rebound from their rocky fourth quarter. But while some risk appetite appears to have returned to the investment landscape, this uplift is extremely nascent, and a number of challenges still remain.

Global

  • January was the best month for the global equity markets in more than seven years.
  • Markets were boosted by strong corporate earnings results across the board.

UK

  • UK equity markets rose over the course of January, providing the first month of positive returns since the third quarter of 2018.
  • The heightened political tension that has characterised recent months continued in to the new year, as the deadline for Britain’s exit from the European Union draws closer. In January the House of Commons voted twice on the Prime Minister’s withdrawal agreement. In the first vote, MPs voted-down the bill by an historic margin. However, two weeks later the Prime Minister succeeded in securing MPs backing, subject to material amendments to the backstop arrangement proposed by the agreement.
  • Sterling enjoyed an increase in value versus the US dollar despite ongoing Brexit uncertainty.
  • The UK’s high-street retailers continued to dominate headlines amid ongoing challenging market condition.

Fixed Interest

  • It was a positive start to 2019 for corporate bond markets.
  • Given the market’s attraction towards riskier assets, government bonds were generally weaker, with both Bunds and Treasuries delivering negative returns. Gilt returns, on the other hand, were positive and spent the month trading in line with expectations over Brexit.
  • Significantly stronger than expected, US employment data set the tone early in the month. Non-farm payrolls (the widely watched monthly US employment statistic) showed that the US had generated 128,000
  • more jobs in December 2018 than expected.
  • Financial markets started to think that a ’no deal’ Brexit had been taken off the table. This helped sterling denominated assets to rally.

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